Walmart Inc.: Outlines Growth Strategy

Bentonville / AR. (wama) Walmart Inc. is kicking off its two-day 2023 Investment Community meeting, where leadership will highlight how the company is investing to strengthen its business through its people and an unparalleled, next generation supply chain network of stores, clubs and fulfillment centers, and driving future global growth opportunities across its omnichannel ecosystem and high value initiatives. The company is also reiterating its first quarter and full-year guidance for fiscal year 2024.

«We are in a unique position to serve our customers and members however they want to shop, which will fuel continued growth,» said Doug McMillon, Walmart president and chief executive officer. «As we grow, we will improve our operating margin through productivity advancements and our category and business mix, and drive returns through operating margin expansion and capital prioritization.»

A People-Led, Tech-Powered Omnichannel Retailer

As part of the meeting, the company is highlighting its purpose, unique culture and the importance of its associates and unveiling its plan for a new more connected and automated supply chain which will improve the experience for its customers and associates and simultaneously increase productivity.

Through its extensive work, Walmart is reengineering its supply chain to fulfill customer needs with a more intelligent and connected omnichannel network that is enabled by greater use of data, more intelligent software and automation. The outcome improves in-stock, inventory accuracy and flow whether customers shop in stores, pickup, or have a delivery.

Walmart showcased its supply chain innovation Tuesday at its Brooksville, Florida, regional distribution center, as one piece of how the company is building a scaled system of supply chain capabilities that uses a combination of data, software and robotics. Through automation and state-of-the-art technology, the company illustrated how the increased item storage allows the distribution center to provide a more consistent, predictable and higher quality delivery service to stores and customers and react more quickly to customer demand.

Stores operate as a place to shop and as fulfillment centers and delivery stations. Distribution and fulfillment centers hold a mix of items, from suppliers and sellers. This allows Walmart to use its existing assets more flexibly and efficiently for new ways of working.

By the end of Fiscal Year 2026, Walmart believes roughly 65 percent of stores will be serviced by automation, approximately 55 percent of the fulfillment center volume will move through automated facilities, and unit cost averages could improve by approximately 20 percent.

As the changes are implemented across the busines”s, one of the outcomes is roles that require less physical labor but have a higher rate of pay. Over time, the company anticipates increased throughput per person, due to the automation while maintaining or even increasing its number of associates as new roles are created.

«It all starts with our associates,» McMillon said. «We are a people-led, tech-powered omnichannel retailer. As it relates to being people-led, it’s about purpose, values, culture, opportunity and belonging. We serve our associates by creating opportunities. Opportunities that turn jobs into careers. We help bring dignity to work by enabling them to see how they’re serving others, as part of a team, and helping them achieve their potential. And as we serve them, they serve our customers and members well…they make the difference.»

Financial Framework

Walmart will outline how the company expects its growth investments to transform its financial profile, centering on three key building blocks: sales growth from its omni-channel business model; diversifying earnings streams through improved category and business mix; and scaling proven, high-return investments that drive operating leverage and improve incremental operating margins.

«We believe that we have the building blocks in place to help define the next chapter of retail and do so while driving strong growth and shareholder returns,» said John David Rainey, Walmart executive vice president and chief financial officer. «Looking at where we are today, we believe that approximately 4 percent sales growth, and growing operating income at a faster rate, are still the appropriate targets for our business over the next 3-5 years. The investments we’ve made have positioned us well and stand to generate steady and sustained growth at higher margins. Achieving our targeted 4 percent sales growth over the next five years would add more than USD 130 billion of sales on top of our roughly USD 600 billion base today. On top of that, we think the opportunity for operating income growth over the next 3-5 years could be better than what we’ve outlined.»

Walmart’s multi-year growth outlook assumes all three business segments contribute to its mid-single-digit sales growth target. The company is strengthening its global omni-channel ecosystem and scaling higher-margin value streams that serve customers and businesses and are natural connectors to its omnichannel retail business. This includes advertising, data, memberships and marketplace, all initiatives that will help deliver a better customer and member experience while driving stronger returns.